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Zuckerberg Agrees to Stay in California Amid Proposed Billionaire Tax
· Confirmed
In Short: Meta CEO Mark Zuckerberg has agreed to remain in California for eight years to avoid a proposed billionaire wealth tax.
Meta CEO Mark Zuckerberg has agreed to remain in California for eight years to avoid a proposed billionaire wealth tax, according to a company filing.
Zuckerberg, who is the world's sixth-richest person with a net worth of approximately $250 billion, had previously considered moving his primary residence out of California due to Proposition 40, a ballot initiative that would impose a one-time tax equal to 5% of net worth on billionaires.
The filing revealed that Zuckerberg had warned the company's board he might sell his $110 million Palo Alto compound and establish residency elsewhere if the tax were approved.
To address these concerns, Meta plans to issue a new class of non-voting Class C common stock in January 2027, allowing Zuckerberg to sell 20% of these shares immediately, representing 10% of his overall economic stake in the company.
This arrangement would enable Zuckerberg to pay the tax without giving up voting control, as the remaining 80% of the shares would be available for sale over the next eight years.
Zuckerberg noted that he had taken only a $1 annual salary since 2013 for serving as CEO, and that the tax liability could be large enough to reduce his voting interest in the company to approximately 53%.
The special committee of independent directors emphasized the importance of Zuckerberg remaining in California to maintain close coordination with Meta's management and proximity to its headquarters.
California's nonpartisan Legislative Analyst's Office (LAO) warned that some billionaires may decide to leave the state in response to the tax, potentially reducing the income tax revenue they generate.
The ballot proposal, which could be subject to lawsuits even if voters approve it, calls for a one-time 5 percent tax on stock and other assets held by billionaires in the state as of January 2026.
California is home to most of the US's technology giants and there are around 225 billionaires who reside in the state, according to the Americans for Tax Fairness campaign group.
Zuckerberg's agreement with Meta comes after a surge in hiring at the company during the pandemic, followed by a whistleblower scandal and a refocus on building out the metaverse, which included renaming the company from Facebook to Meta.
Meta reported revenue of $64.6 billion for the third quarter, up 26% from the same period last year, and the company plans to spend as much as $145 billion this year on AI projects.
What this adds
This report adds details about the negotiations between Zuckerberg and Meta's board, as well as the potential impact of the proposed tax on Zuckerberg's control over the company.
The sources have not established the exact amount of tax Zuckerberg would owe if the measure passes, but estimates range from $10 billion to $12.5 billion.
Background
Meta CEO Mark Zuckerberg has agreed to remain in California for eight years to avoid a proposed billionaire tax.
What's confirmed
- Zuckerberg, Meta's CEO, previously told the company he was considering moving his primary residence outside California because of Proposition 40, a ballot initiative that would impose a one-time tax equal to 5% of net worth on billionaires who were California residents on Jan. 1, 2026, if approved.
- Meta CEO Mark Zuckerberg reached an agreement with the company’s board to help him pay a proposed California billionaire tax without losing his controlling stake in the company, according to regulatory filings published this week.
- Zuckerberg is the sixth-richest person in the world with a net worth estimated at more than $220 billion, according to Forbes.
- Meta CEO Mark Zuckerberg listens as President Donald Trump speaks in the East Room of the White House in Washington, Tuesday Sept.
- "dramatic and unprecedented transformation taking place in the tech industry and global economy related to artificial intelligence."
What's still developing
- "We created this new class of shares with the purpose of creating a publicly traded non-voting stock usable for capital raising, employee compensation, acquisitions, other general corporate purposes while preserving the voting power of existing Class A and B shareholders," Li said during Meta's third-quarter earnings call.
- The social media firm made the disclosures about Zuckerberg’s threats to offload his $110 million Palo Alto compound and establish residency outside the Golden State in a 109-page Securities and Exchange Commission filing posted Wednesday, which revealed for the first time the billionaire’s concerns about how the wealth tax could rip away his control of the firm he founded.
- “The special committee was mindful about the difficulties the company faced during the COVID-19 pandemic when Zuckerberg could not be physically present with the company’s management team and did not want the company to face similar challenges going forward,” according to Wednesday’s filing.
- Many wealthy individuals, including Zuckerberg, currently avoid significant tax payments by borrowing against their shares and taking low salaries—$1 annually in the Meta CEO’s case.
- Becerra has called Prop. 40 "sketchy" and argued the state needs a long-term solution to address health care funding challenges Opponents of Proposition 40 qualified Props 41 and 42 for the November ballot as countermeasures to the billionaire tax, potentially preventing it from taking effect even if it passes. "If passed, Prop 41 would nullify any new state taxes enacted after Jan. 1, 2026 that do not count toward California's spending cap."
- Newsom has said he supports a national billionaire tax but argues a California-only wealth tax would put the state at a competitive disadvantage because wealthy residents could move elsewhere to avoid it.
- Meta CEO Mark Zuckerberg enters the debate on AI regulation, arguing against slowing down development.
- He secured the deal with a special committee of Meta after "robust" and "at several points, contentious" negotiations, according to a Wednesday financial disclosure.
- The company alluded to problems the company experienced during the Covid-19 pandemic, when Zuckerberg began working outside of the office and mostly from his large compound in Kauai, Hawaii.
- The agreement gives Zuckerberg, whose wealth is estimated to exceed $200bn (£149bn), even more shares in Meta to make up for the fraction of his fortune he may lose if the tax wins voter approval in November.
- With Zuckerberg leading the company's efforts to catch up in the AI race, Meta's board said it sees a future of "tremendous market opportunity" for the company.
- Cash flow represents the money a company retains after paying for operations and investments, meaning Meta is now spending more money than it is bringing in.